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Orange, L.A. Counties Plot Transit Tax Raid

July 28, 1995|ERIC BAILEY and JODI WILGOREN | TIMES STAFF WRITERS

SACRAMENTO — Thrown together by a common desperation for cash in their home constituencies, lawmakers from Orange and Los Angeles counties hope to use the state budget hearing process this weekend to give their financially strapped county governments the power to raid transportation tax dollars, officials said Thursday.

The proposal, which could be voted Saturday along with the state budget, would give each county's Board of Supervisors authority to take sales-tax funds now used to subsidize bus service, and require local transit authorities to use other transportation funds to cushion the possible impact on bus riders.

Bankrupt Orange County could get as much as $70 million a year for 15 years, according to drafts of the proposal now being circulated in the Capitol. Los Angeles County, facing a $1.2-billion budget shortfall, would likely take in about $75 million annually for five years, legislators said.

"We think this is a good opportunity to bring about a solution for both L.A. and Orange counties," said Assemblyman Curt Pringle (R-Garden Grove).

"The reality is that if we want to move this and have the impact felt immediately, we need to build coalitions," agreed state Sen. Richard Polanco (D-Los Angeles).

Democrats and Republicans plan to discuss the tax-diversion proposal during separate party caucuses today. The normally warring delegations from Los Angeles and Orange counties represent nearly a third of the votes in both houses, and together can wield far more legislative clout.

Assemblyman Phillip Isenberg (D-Sacramento) said if the conservative and liberal lawmakers from the two counties present a united front, the tax-shift proposal would almost be a slam-dunk.

"My hunch is, unless the budget involves some kind of relief for Los Angeles [County], it is unlikely there will be enough votes to pass it initially," Isenberg said. The bonus of financial help for bankrupt Orange County would only "improve its chances," he added.

Since Orange County's Dec. 6 bankruptcy filing, people both inside and outside government have looked longingly at the Orange County Transportation Authority's coffers, flush with about $340 million for an urban light-rail system to be built sometime in the future.

But that money comes from Measure M--a half-cent sales-tax passed in 1990 for specific transportation projects--and cannot be diverted to other uses without voter approval.

Last week, however, the county's financial and legal consultants presented a back-door plan to use Measure M funds by passing legislation that would take other sales-tax money away from OCTA, and order OCTA to replace those funds with Measure M dollars that have not yet been allocated to specific projects. This idea is what legislators have jumped on.

"It's a tremendous step in the right direction," Orange County's lead bankruptcy attorney, Bruce Bennett, said Thursday of the quick movement in Sacramento. "It doesn't solve the problem in and of itself, but it's a huge help."

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OCTA Chief Executive Stan Oftelie could not be reached for comment Thursday afternoon. He has said previously that he is willing to use OCTA's excess cash to help in the bankruptcy, but hopes to gain control of John Wayne Airport in return.

Chris Varelas of Salomon Bros., Orange County's financial adviser, said the county is crunching numbers to determine what impact taking the sales tax money would have on OCTA's bus service. He said that Measure M funds could easily be found to replace at least $35 million of bus money. But he said he needs more time to determine whether the bus system could survive intact if the county took all $70 million it would be authorized to take under the current proposal.

A 15-year revenue stream of $35 million a year would be enough to back the issuance of more than $300 million in new bonds. Combined with the $460 million in reserves the county already has, this would give the county almost enough to pay off the $800 million in short-term notes whose maturities were recently extended to June, 1996.

But the county also has more than $1 billion in other outstanding debts, including about $850 million owed to 200 local governments that lost money late last year when the county-run investment pool collapsed.

"This is a good beginning, [but] we cannot choose our favorite creditor and specifically pinpoint the funds for bondholders, so this alone isn't sufficient to remove from the county any fear of default," Varelas warned.

The county is also working on legislative proposals that would divert property tax revenue from special districts to the county's bankruptcy recovery effort. Orange County legislators in Sacramento, however, favor asking cities and special districts that lost money in the pool to forgive the debt the county owes them.

The pool participants, meanwhile, have suggested swapping county assets either for debt forgiveness or cash payments, and plan to present a proposal to that effect today) or Monday.

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